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Sempra’s Share Price Drops After Beating Wall Street Projections

You know it’s a strange market when Sempra Energy reports earnings that easily beat Wall Street projections but its stock still drops $1.75 a share.

For the third quarter, Sempra had net income of $308 million, up 1 percent from the like quarter of 2007. On a per share basis, earnings were $1.24, an increase of 8 percent.

“Given the turmoil and dislocation in the financial markets, we are pleased with our third-quarter results,” said Donald Felsinger, Sempra’s chairman and CEO.

He may be satisfied, but investors apparently weren’t. They knocked down the value of the stock on a day when the Dow Jones industrial average was down only 73 points.

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Sempra, which trades on the New York Stock Exchange under SRE, has ranged between $34.29 and $64.29 in the past 52 weeks, and closed Nov. 11 at $41.39.

Sempra is the parent of San Diego Gas & Electric and Southern California Gas, plus a group of related subsidiaries that include energy pipeline development, liquefied natural gas storage and transmission and commodities trading.

The commodities trading unit, now a joint venture with the Royal Bank of Scotland, took a net loss of $3 million, compared with net profits of $87 million in last year’s third quarter. The loss was attributed to a steep decline in commodities prices in the early part of the quarter and reduced market liquidity.

Not content to operate electric power and gas plants, Sempra has been a recent developer of several major electric power generation plants requiring lots of capital.

In its third-quarter presentation, Sempra said projected funding needs for the coming year are $3.7 billion, while existing sources on hand are $2.7 billion. That means the company has to borrow $1 billion.

The credit markets being what they are, investors may be skittish, but Sempra executives said not to worry.

Chief Financial Officer Mark Snell said Sempra’s cash position at Oct. 31 was $2.5 billion. It also has a credit line that totals $4.3 billion from a syndicate of 19 banks.

The most capital intensive project on Sempra’s plate right now is the Rockies Express, a 1,678-mile pipeline that will move natural gas from Colorado to eastern Ohio for distribution in the Midwest.

Sempra said the cost of the pipeline has risen to $6 billion from $4.4 billion, mainly due to increased costs for labor, steel and permits. Sempra’s estimated share of the increase is $750 million.

The pipeline, which should generate annual distributions between $80 million and $90 million, is expected to be completed in a year.

Another major project, a liquefied natural gas terminal just north of Ensenada in Baja California, Mexico, began accepting LNG deliveries this year from Indonesia and the Middle East. The LNG plant cost $1 billion to build.

Sempra is also trying to develop energy generation from solar and wind sources in Imperial County, specifically through a planned Sunrise Powerlink line originally to be sent through the Anza-Borrego State Desert Park and other parts of East County.

The company recently said it would be willing to take a southern route, but that would likely boost costs by “a few hundred million dollars,” or close to $1.9 billion, according to Felsinger.

Sempra maintained its 2009 earnings guidance to a range of $4.35 to $4.60, but said that is subject to adjustment when it reports its fourth-quarter results in February.

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Ticker Takes: DEI Holdings said it is exiting the satellite radio market and winding down an agreement with Sirius XM Radio that expires Jan. 31. Revenue for the third quarter was $76.7 million, down from $84.5 million in 3Q of 2007 Rubio’s Restaurants reported third-quarter revenue rose about 7 percent to $47 million, while net income gained 8 percent to $789,000. For the nine months, revenue was up 5 percent to $134 million ViaSat said its revenue for the latest quarter of $159 million was a record. For the first six months of its fiscal year, it had $312 million, up from $275 million in the same period of 2007. Net income was $15.5 million, up from $12.8 million Leap Wireless International said nine-month revenue of $1.4 billion was 20 percent above the same period of 2007. Net customers added in the quarter were 156,000, bringing total customers to 3.5 million as of Sept. 30 Novatel Wireless said it filed first- and second-quarter reports. An internal review found a material weakness in internal control regarding financial reporting related to certain revenue recognition NextWave Wireless reported a nine-month net loss of $434.7 million on revenue of $51.5 million compared with a net loss of $229.5 million on revenue of $26.4 million ResMed said it had third-quarter net income of $28 million, up 16 percent from the like quarter of 2007. Revenue was $217.9 million, up 17 percent Maxwell Technologies said third-quarter revenue was up 53 percent from a year ago to $21.7 million. Net loss for the quarter was $5.7 million compared with a net loss of $2.6 million in 3Q of 2007 Kratos Defense & Security Solutions said nine-month revenue was $222 million, up 54 percent from the like period of 2007. Kratos acquired two businesses since last year’s third quarter, including SYS Technologies Royale Energy reported net profit of $1.4 million for the third quarter compared with a net loss of $121,000 for the same quarter of 2007.

Send any news of locally based public companies to Mike Allen via e-mail at mallen@sdbj.com. He can be reached at 858-277-6359.

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